Foreign traders moving in on Canadian wheat market

Note, the story mentions “the United Nations has estimated a growing population means the world requires a 70-per-cent increase in food production by 2050” – this is also driving our potash industry.

Eric

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Foreign traders moving in on Canadian wheat market

JEN SKERRITT

Contributed to The Globe and Mail

Published Thursday, Jun. 16, 2016 4:59PM EDT

Last updated Thursday, Jun. 16, 2016 5:04PM EDT

From China to Saudi Arabia, grain traders around the world are looking to grab a piece of Canada’s wheat market. China’s state-owned Cofco Agri Ltd. is hiring three grain traders for a new office in Manitoba. That follows moves by Swiss-based Glencore PLC and the state-owned Saudi Agricultural & Livestock Investment Co. to establish a foothold in Canada.

While the nation has long been one of the world’s major wheat growers and shippers, the government’s marketing monopoly that lasted seven decades was a barrier for foreign traders. The end of state control in 2012 through the Canadian Wheat Board has ushered in a new era for the country which is becoming made the country an international hub for grain dealers.

“Since the changeover from the wheat board days, we’ve seen more players come into the market,” David Reimann, a market analyst with Cargill Ltd. in Winnipeg, said in a telephone interview. “That’s brought in more competitive players.”

The new Cofco office is in Winnipeg, according to a posting on LinkedIn, which is already home to major grain-handlers with operations in Canada, including Richardson International and Cargill. A Cofco spokesman didn’t respond to calls seeking comment.

Expanding emerging economies have driven up grain demand, and the United Nations has estimated a growing population means the world requires a 70-per-cent increase in food production by 2050. At the same time, climate change has increased weather risks for crops and areas that are typically dry could need even more resources for plants. Saudi Arabia will rely almost completely on wheat imports in 2016, a reversal from its policy of self-sufficiency.

Canada is benefactor from the agriculture boom. The country’s shipments of wheat to China surged about 40 per cent in the nine months through April from a year earlier. Some countries seeking food security are moving in to have more control over supply. The number of licensed grain dealers in the nation jumped by almost 30 per cent in the three years to August, according to Canadian Grain Commission data. More than one-fifth of the dealers are headquartered outside of its borders.

Canada’s government ended the Winnipeg-based Canadian Wheat Board’s marketing monopoly on wheat barley on Aug. 1, 2012, to increase competition in grain-handling. Glencore PLC, the world’s biggest publicly listed commodity trader, purchased Regina-based Viterra the same year and is now building new facilities and improving existing grain elevators to accommodate rising crop production. In 2015, Bunge Ltd. and Saudi Agricultural & Livestock Investment Co. (SALIC) acquired a majority stake in the former wheat board.

“There’s more diversification,” Errol Anderson, the president of ProMarket Wire in Calgary, said in a telephone interview. “There are newcomers looking at the Canadian market” that are making the market healthier and providing farmers with more choices, he said.